Privatization of MCB : Corporate Governance Failure

This paper aims to highlight the failure of corporate governance in banking sector. Banking in Pakistan was predominantly controlled by the state until 1990. The five major commercial banks controlled 100% of the domestic banking market. However in 1990, the government declared privatization as one of its key policy objectives. The privatization of Muslim Commercial Bank (MCB) Limited was declared, and bids were requested from interested parties. Four bids were received and the evaluation committee headed by the then Governor of State Bank of Pakistan did not ratify the highest two bidders. Instead, the third highest bidder (the National Group) was invited to match the highest bid. The contract was agreed upon and signed. The natural question here is whether the bidding process was fair. Clearly, there are reasons to doubt the fairness, given that the deal was awarded to the third highest bidder